WATER-JEL TECHNOLOGIES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the Annual Meeting of Stockholders of
Water-Jel Technologies, Inc. (the "Company") will be held at The Meadowlands
Hilton, Two Harmon Plaza, Secaucus, New Jersey on February 20, 1998 at 10:00
A.M. for the following purposes as set forth in the accompanying Proxy
Statement:
1. To elect three directors to serve for a term of one year;
2. To approve the adaption of a new 1998 Stock Option Plan
authorizing the Company to issue options to acquire up to
2,000,000 shares of the Company's Common Stock to directors,
officers, employees and others who render services to the
Company.
3. To approve the merger of the Company into a Delaware
subsidiary in order to effect the change of the Company's
state of incorporation from New York to Delaware.
4. To approve amendments to the Company's Certificate of
Incorporation to:
(a) Change the Company's name to X-Ceed, Inc. and
(b) Increase the amount of Common Stock which the Company
is authorized to issue to 30,000,000 shares with a
par value of $.01 per share.
5. To ratify the selection and appointment by the Company's Board
of Directors of Holtz Rubenstein & Co. LLP, independent
certified public accountants, as auditors for the Company for
the fiscal year ending August 31, 1998; and
6. To transact such other business as may properly come before
the meeting or any adjournments thereof.
If both proposals 3 and 4 are approved, the actions contemplated by
proposal 4 will be effected through the merger reincorporating the Company in
Delaware. Holders of record of the Company's Common Stock at the close of
business on December 31, 1997, will be entitled to vote at the meeting.
By Order of the Board of Directors
Werner G. Haase,
Chairman
Dated: December ___, 1997
Whether or not you plan to attend the meeting, please date and sign the
enclosed proxy and return it in the envelope provided. Any person giving a proxy
has the power to revoke it at any time prior to its exercise and if present at
the meeting may withdraw it and vote in person. Attendance at the meeting is
limited to stockholders, their proxies and invited guests of the Company.
<PAGE>
WATER-JEL TECHNOLOGIES, INC.
488 Madison Avenue
New York, New York 10022
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 20, 1998
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of proxies to be voted at the Annual Meeting of
Stockholders of the Company to be held at The Meadowlands Hilton, Two Harmon
Plaza, Secaucus, New Jersey at 10:00 A.M. on February 20, 1998 and at any
adjournments thereof.
The shares represented by proxies that are received in the enclosed
form and properly filled out will be voted in accordance with the specifications
made thereon. In the absence of specific instructions, proxies will be voted in
accordance with the recommendations made herein with respect to the proposals
described in this Proxy Statement. Proxies may be revoked by stockholders by
written notice received by the Secretary of the Company at the address set forth
above, at any time prior to the exercise thereof. Stockholders of record at the
close of business on December 31, 1997 are entitled to notice of and to vote at
the Annual Meeting or any adjournments thereof. The Company's only class of
voting securities is its Common Stock, par value $.08 per share, of which
7,043,180 shares were outstanding as of December 17, 1997.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
It is the intention of the persons named in the enclosed form of proxy,
unless such proxy specifies otherwise, to nominate and to vote the shares
represented by such proxy for the election of the nominees listed below to hold
office until the next Annual Meeting of Stockholders or until their respective
successors shall have been duly elected and qualified. Messrs. Werner Haase,
Norman Doctoroff and John A. Bermingham are presently directors of the Company.
The Company has no reason to believe that any of the nominees will become
unavailable to serve as directors for any reason before the Annual Meeting.
However, in the event that any of them shall become unavailable, the person
designated as proxy reserves the right to substitute another person of his
choice when voting at the Annual Meeting.
Certain information regarding each nominee is set forth in the table
and text below. The number of shares beneficially owned by each nominee is
listed below under "Principal Stockholders and Share Ownership of Directors and
Officers."
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Werner Haase, the Company's Chairman and Chief Executive Officer, and
Nurit Kahane Haase, Senior Vice President, are married. There are no other
family relationships among directors, nominees or executive officers nor is
there any arrangement or understanding between any such director or nominee and
any other person pursuant to which any director or nominee was selected as such.
The following table sets forth the name, age and term of office as
director for each nominee for election as director and his present position(s)
with the Company:
Nominee for Election Director Since Position(s)
Werner G. Haase (50) 1987 Chairman of the Board and Chief
Executive Officer
Norman Doctoroff (62) 1996 Director
John A. Bermingham (53) 1997 Director
Directors are elected to serve until the next annual meeting of
stockholders of the Company or until their successors are elected and qualified.
The Board of Directors held five meetings in the fiscal year ended August 31,
1997 and also met informally and acted by written consents during the year.
Officers serve at the discretion of the Board of Directors subject to any
contracts of employment.
Executive Officers
The following table sets forth the name, age and position of each
executive officer of the Company:
Name Position(s)
Werner G. Haase (60) Chairman and CEO
Nurit Kahane Haase (47) Senior Vice President and Secretary
and Acting President
of Journeycorp Travel Management
Other Officers
In addition to the Company's executive officers, the Company has other
officers as indicated:
Peter D. Cohen (41) Managing Director of Water-Jel Technologies, Inc's.
first aid division.
James Edwards (46) Chief Financial Officer of Water-Jel Technologies, Inc.
Janice Goines (52) Managing Director and Senior Vice-President of the
Journeycorp Travel Management Division
Judith Uhl (52) Managing Director, TheraCom Integrated Medical
Communications, Inc.
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Werner G. Haase has served as a Director of the Company since September
1987 and became Chairman and Chief Executive Officer in July, 1996 following the
acquisition of Journeycraft, Inc. ("Journeycraft") and TheraCom Integrated
Medical Communications, Inc. ("TheraCom"). For more than the past five years,
Mr. Haase has been a Director and Chief Executive Officer of Journeycraft. Mr.
Haase is also a director of PureTec Corporation, a company which manufactures
specialty plastic products and is engaged in the recycling of post consumer
plastics and plastic injection molding.
Nurit Kahane Haase became Senior Vice President of the Company in July
1996 following the acquisition of Journeycraft and TheraCom. For more than the
past five years, Mrs. Haase has been President of Journeycraft.
Norman Doctoroff was elected a Director of the Company in May 1996.
Until 1995, he was President of Gemini Industries, a company engaged in the
production of consumer electronics accessories. Since then he has served as an
independent management consultant to Gemini Industries and other companies.
John A. Bermingham has served as consultant to the Company since April,
1997. Prior to that he served as president of Rolodex, Inc. for one year. From
1993 to 1996, Mr. Bermingham held the position of President and Chief Executive
Officer of AT&T Smart Card Systems and Solutions, a division of AT&T. On
November 13, 1997, Mr. Bermingham was elected to serve as an interim director of
The Company until the next annual meeting of stockholders.
Peter D. Cohen served as President and Chief Executive Officer of the
Company from May 1988 until July 1996. Since July 1996, he has served as a
Vice-President and Managing Director of Water-Jel's first aid division. Previous
to that, he was employed by Holtz Rubenstein & Co. LLP, independent public
accountants. In September 1992, Mr. Cohen became a director of the American Tea
Tree Association (ATTA) and in September 1994 was elected as treasurer. ATTA is
a non-profit trade organization involved in educating the consumer to the
benefits of tea tree oil products.
James A. Edwards has served as the Company's Chief Financial Officer since
June, 1993. Prior to that he was employed at U.S. Travel, Inc. as a comptroller.
Janice Goines has been employed by Journeycorp, a division of
Journeycraft since January, 1991, and as such has been responsible for the
day-to-day operations of Journeycorp. Ms. Goines was previously employed as a
Vice-President of Thomas Cook Travel, Inc. (Southern Division) from 1979 to
1990.
Judith Uhl has been Managing Director of TheraCom since 1992. Prior to
that, she was a director of Medical Symposia for Dragon Medical Communications,
Inc.
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Executive Compensation
The following table sets forth information with respect to compensation
paid by the Company for the services to the Company during the three years ended
August 31, 1996 to the Company's Chief Executive Officer and two other officers
with compensation in excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Re- All
Annual stricted Securities Other
Compen- Stock Underlying LTIP Compen-
Name and sation Awarded Options/ Payouts sation
Principal Position Year Salary($) Bonus($) ($) ($) SARs(#) $ $
- ------------------ ---- ---------- -------- --------- ---------- ---------- ------- -------
Werner Haase (1)(2)(3) 1997 $500,000 $300,000 $ 82,152 0 0 $ 0 $ 0
Chairman and CEO 1996 $ 10,500 $ 22,250 $ 0 0 0 $ 0 $ 0
1995
Nurit Haase (1) 1997 $250,000 $ 0 $ 0 0 0 $ 0 $ 0
Sr. Vice President 1996 $ 10,500 $ 63,900 $ 0 0 0 $ 0 $ 0
1995
Yitz Grossman (4)(6) 1997
Former Chairman 1996 $150,000 $ 0 $ 71,000 0 100,000 $ 0 $ 0
and Secretary 1995 $139,000 $ 45,000 $ 15,000 0 100,000 $ 0 $ 0
Peter Cohen (5)(6) 1997
Former President 1996 $111,000 $ 0 $ 75,000 0 100,000 $ 0 $ 0
1995 $100,000 $ 45,000 $ 0 0 100,000 $ 0 $ 0
</TABLE>
(1) Werner Haase and Mr. Haase's wife, Nurit Kahane Haase, assumed
their current positions with the Company on July 2, 1996 following the
acquisition of Journeycraft and TheraCom. Information is given only for periods
subsequent to July 2, 1996.
(2) On November 13, 1997, the Board of Directors, Mr. Haase abstaining,
awarded a bonus of $300,000 to Mr. Haase based on the Company's performance for
fiscal 1997.
(3) Represents premiums for life insurance policies paid by the Company
on behalf of Mr. Haase.
(4) Mr. Grossman resigned from his positions with the Company effective
December 12, 1996.
(5) Mr. Cohen resigned as President, Chief Executive Officer and
Treasurer of the Company effective July 2, 1996. He continues to serve as
Managing Director of the first aid division, which is not an executive officer
position.
(6) During fiscal 1996, the Company transferred certain life insurance
policies to Messrs. Grossman and Cohen which are included in "Other Annual
Compensation."
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The aggregate amount of personal benefits cannot be
specifically or precisely ascertained and do not, in any event, exceed $50,000
or 10% of compensation as to any person. The Company offers health insurance to
all of its employees. At present time the Company does not have any retirement,
pension, profit sharing, or other similar programs or benefits for its executive
officers.
The Company has not paid remuneration of any nature for or on
account of services rendered by a director in such capacity.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
Percent of
Number of Total Options/
Securities SARs Granted
Underlying to Employees Exercise or
Options/SARs in Fiscal Base Price
Name Granted (#) Year ($/Sh) Expiration Date
(a) (b) (c) (d) (e)
-0- -0- -0-
No options were granted to anyone during fiscal 1997.
AGGREGATED OPTION/SAR EXERCISE IN LAST FISCAL YEAR
AND FY-ENDED OPTION/SAR VALUES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End at FY-end
(#) ($)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable
--------- --------------- ------------------ ------------- -------------
WERNER HAASE, Chairman and CEO -0- -0- 243,750 $354,680
</TABLE>
All of the foregoing options are exercisable: 143,750 at an exercise price
of $1.52 and 100,000 at an exercise price of $2.19.
Employment Agreements
In July 1996, the Company entered into a five-year employment agreement
with Nurit Kahane Haase effective as of July 1, 1996. The agreement provides for
annual compensation of $250,000 per year. In the event of a change in control of
the Company, Mrs. Haase is entitled to receive a one-time payment equal to three
times her then current annual compensation. A change of control includes the
acquisition of over 30% of the
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Company's stock, the sale or transfer of over 50% of the Company's assets, or
certain mergers or other combinations.
In December 1996, the Company entered into a five-year employment
agreement with Werner Haase effective as of January 1, 1997. The agreement
provides for annual compensation of $500,000 per year as well as the maintenance
of various insurance policies. In the event of a change in control of the
Company, Mr. Haase is entitled to receive a one-time payment equal to three
times his then current annual compensation. A change of control includes the
acquisition of over 30% of the Company's stock, the sale or transfer of over 50%
of the Company's assets, or certain mergers or other combinations. Mr. Haase's
agreement also entitles him to receive bonuses at the discretion of the Board of
Directors.
Stock Option Plans
The Company has adopted three stock option plans. The Non-Qualified
Stock Option Plan ( the "NQSO Plan") which expired on April 6, 1994 covering
187,500 shares of the Company's Common Stock, $.08 par value, pursuant to which
officers and employees of the Company were eligible to receive non-qualified
stock options. As of November 15, 1997, options to acquire 128,125 shares have
been granted under the NQSO Plan at exercise prices of $1.52 per share. All
options granted under the NQSO Plan have been at exercise prices at least equal
to the fair market value of the Common Stock on the date of grant.
Under the 1990 Stock Option Plan (the "1990 Plan") the Company may
grant to its officers, key employees and others who render services to the
Company, options to purchase up to 187,500 shares of the Company's Common Stock
at a price which may not be less than the fair market value per share in the
case of incentive stock options or 85% of fair market value in the case
non-qualified options for such stock in the date of the granting of the Option.
As of December 15, 1997, options to acquire a total of 170,000 shares have been
granted under the 1990 Plan at exercise prices ranging from $1.52 to $2.00 per
share.
The 1995 Stock Option Plan (the "1995 Plan") operates on substantially
the same terms as the 1990 Plan except that it includes option to purchase up to
500,000 shares of the Company's Common Stock. Any options granted under the plan
expire ten years from the date of grant. The plan expires March 1, 2005. As of
November 15, 1997 all available options had been granted under the 1995 Plan and
options to acquire a total of 467,000 shares remain outstanding at an exercise
price of $2.19 per share.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of December 17, 1997 by:
(i) each person who is known by the Company to own beneficially more than 5% of
the Company's outstanding
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Common Stock; (ii) each of the Company's officers and directors; and (iii) all
officers and directors of the Company as a group:
SECURITY OWNERSHIP TABLE
Amount and Nature of
Name and Address Beneficial Ownership Percentage
Werner G. Haase (1) 2,525,625 34.7%
488 Madison Avenue
New York, NY
Nurit Kahane Haase (1) 2,525,625 34.7%
488 Madison Avenue
New York, NY
J. Morton Davis (2) 543,389 7.7%
44 Wall Street
New York, NY
William Walters 500,000 7.0%
650 Fifth Avenue
New York, NY
Seneca Associates 400,000 5.7%
56 Rechov Rochild
Bat Yam, Israel
Yitz Grossman (3) 600,250 8.2%
40 Fulton Street
New York, NY
Norman Doctoroff (4) 25,000 0.5%
81 Two Bridges Road
Fairfield, NJ
All officers and
directors as a group
(3 persons) 2,560,625 35.0%
(1) Consists of 1,131,875 shares of Common Stock owned by Mr. Haase, options to
acquire 243,750 shares held by Mr. Haase, 1,112,000 shares owned by Mrs. Haase,
and 37,500 shares held jointly by Mr. and Mrs. Haase.
(2) Consists of 161,454 redeemable Class A Common Stock Purchase Warrants
("Class A Warrants") and an option to purchase 81.6 Units owned by D.H. Blair
Investment Banking Corporation ("Blair"), of which Mr. Davis is Chairman and
sole stockholder. Each Unit entitles the holder to acquire 1,666 shares of
Common Stock and 1,666 Class A Warrants. Each Class A Warrant entitles the
holder to purchase one share of Common Stock and to receive one redeemable Class
B Common Stock Purchase Warrant ("Class B Warrants") at an exercise price of
$3.00 per share exercisable prior to April 30, 1998. Each Class B Warrant
entitles the holder to purchase one share of Common Stock at $6.00 per share
prior to October 30, 1997.
(3) Includes shares issuable on exercise of options to purchase 300,000
shares of Common Stock.
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(4) Represents shares issuable on exercise of options to purchase
25,000 shares of Common Stock.
Certain Relationships and Related Transactions
In July 1996, the Company entered into a four-year consulting agreement
with Target Capital Corp. and Yitz Grossman, which went into effect on September
1, 1996 and terminates on May 16, 2000. Mr. Grossman was Chairman and Secretary
of the Company at the time the agreement was entered into. Mr. Grossman resigned
as an officer and director of the Company in December 1996. The agreement
provides for annual compensation of $150,000 per year and an annual bonus of
$30,000. Mr. Grossman is not required to devote his full time to the Company. In
the event of a change of control of the Company, the agreement provides for a
one-time payment equal to three times the then current annual compensation. A
change of control includes the acquisition of over 30% of the Company's stock,
the sale or transfers of over 50% of the Company's assets, or certain mergers or
other combinations.
During fiscal 1997, the Company sold 50,000 shares of Mark Solutions,
Inc. ("MSI") and received net proceeds of approximately $100,000. Subsequent to
fiscal 1997, the Company sold the remaining balance of 195,000 shares of common
stock and received net proceeds of approximately $740,500. Mr. Grossman, who was
a director and officer of the Company, was also a director of MSI at the time
these investments were made.
In September 1996, the Company loaned $100,000 to Multimedia Tutorial
Services, Inc, a publicly traded company of which Mr. Haase is a director. This
loan was evidenced by a note bearing interest at 8% per annum, originally
payable within 180 days of the date of loan or earlier if additional funding was
raised. In consideration for the loan, the Company received warrants to purchase
a minimum of 200,000 shares of common stock of the borrower. In May 1997, the
Company extended the maturity date of the loan until September 30, 1997. In July
1997, the Company through a limited offer converted its 200,000 warrants into
150,000 shares of common stock. As of November 30, 1997 the loan remains unpaid
and the Company is pursuing collection. However, as a result of the
deteriorating financial condition of the borrower, the Company wrote off the
receivable at August 31, 1997.
PROPOSAL NO. 2
ADOPTION OF THE 1998 STOCK OPTION PLAN
The Board has determined that the Company should adopt a new Stock
Option Plan in order to make options available to employees, officers, directors
and others who render services to the Company. Accordingly, the Board has
adopted the 1998 Stock Option Plan (the "1998 Plan") and recommends to the
stockholders that the 1998 Plan be approved.
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Summary of the 1998 Plan
The Company may grant to its officers, key employees and others who
render services to the Company, options to purchase ("Options") up to 2,000,000
shares of the Company's Common Stock at a price which may not be less than the
fair market value per share in the case of incentive stock options or 85% of
fair market value in the case of non-qualified options for such stock on the
date of the granting of the Option. Payment of the exercise price shall be made
in cash, or, with the consent of the Board, in whole or in part, in shares of
Common Stock or with a full recourse interest bearing promissory note of the
Optionee secured by a pledge of the shares received upon exercise of such
Option. If an option granted under the 1998 Plan shall expire, terminate or be
canceled for any reason without being exercised in full, the corresponding
number of unpurchased shares shall again be available for the purposes of the
1998 Plan. Options may be granted in the form of incentive stock options or
options which do not qualify for treatment as incentive stock options.
The 1998 Plan will be administered by the Board of Directors (the
"Board"). The Board determines the persons who are to be granted Options based
upon the contribution of such persons to the management and growth of the
Company. The 1998 Plan contains no preset criteria determining the identity or
amount of options to be granted to any person or group of persons. Therefore, no
determinations can be made at the present time as to the benefits or amounts
that will be or would have been issued to any specific person or group of
persons under the 1998 Plan. No Option may be exercised after the expiration of
10 years from the date of grant. No Option may be granted under the 1998 Plan
after March 1, 2008.
Incentive stock options are also subject to the following limitations:
(i) The aggregate fair market value (determined at the time an option is
granted) of stock with respect to which incentive stock options are exercisable
for the first time by an optionee during any calendar year (under all such plans
of the Company, its parent or subsidiary) shall not exceed $100,000, and (ii) if
the individual to whom the incentive stock options were granted is considered as
owning stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company, then (A) the option price at the time of grant
may not be less than 110% of the fair market value per share for such Common
Stock and (B) the option period must be no more than five years from the date of
grant.
Unless otherwise determined by the Board or by other provisions of the
Plan, upon the granting of any Option such Option may be immediately exercisable
with respect to 100% of the shares subject to the Option. The Board may, in its
discretion, (A) provide for the holding of such shares of Common Stock in escrow
for a period not exceeding five years, or (B) impose other restrictions on the
vesting of any Option or the vesting of any shares of Common Stock that an
Optionee receives upon exercise of any Option; provided that any and all such
restrictions shall lapse if there is a sale of (A) substantially all of the
assets or (B) 50 percent or more of the voting securities of the Company
(excluding for this purpose Company stock sold in a primary or secondary public
offering). Any restrictions
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the Board imposes on an Option pursuant to this paragraph shall be specified in
the stock option agreement governing such Option.
Upon issuance of any shares of Common Stock to an optionee pursuant to
the exercise of a nonstatutory option the Company or a subsidiary may issue a
supplemental cash award to the Optionee which shall be the smaller of (a) 65% of
the difference between the fair market value of the shares and the option price,
or (b) 90% of the option price.
An individual whose employment terminates by reason other than death
may generally exercise an Option within a thirty-day (30) period, or if
termination is by reason of death, within the twelve month period after such
termination, and then only if and to the extent that such Option was exercisable
at the date of termination of employment.
The Board of Directors may, at any time, alter, suspend or terminate
the 1998 Plan, except that the Board of Directors may not, without further
approval of the stockholders, (1) increase the maximum number of shares for
which Options may be granted under the 1998 Plan or which may be acquired by an
individual employee, (2) decrease the minimum purchase price for shares of
Common Stock to be issued upon exercise of Options or (3) change the class of
persons eligible to receive Options. Except in limited circumstances, the Board
may not make any change which would have a material adverse affect upon any
Option previously granted unless the consent of the Optionee is obtained. No
person may be divested of ownership of shares already issued under the 1998
Plan.
The foregoing summary of the 1998 Plan is qualified in its entirety by,
and reference is made to, the 1998 Plan, a copy of which is attached hereto as
Exhibit A.
The grant or exercise of an incentive stock option will not generally
cause recognition of income by the Optionee; however, the amount by which the
fair market value of a share of Common Stock at the time of exercise of an
incentive stock option exceeds the option price, is a "tax preference item" for
purposes of the alternative minimum tax. In the event of a sale of the shares
received upon exercise of an incentive stock option more than two years from the
date of grant and more than one year from the date of exercise, any appreciation
of the shares received above the exercise price should qualify as long-term
capital gain. However, if shares of Common Stock acquired pursuant to the
exercise of an incentive stock option are sold by the Optionee before the
completion of such holding periods so much of the gain as does not exceed the
difference between the option price and the lesser of the fair market value of
the shares at the date of exercise or the fair market value at the date of
disposition will be taxable as ordinary income for the taxable year in which the
sale occurs. Any additional gain realized on the sale should qualify as a
capital gain. Although the Tax Reform Act of 1986 has eliminated the difference
in tax rates between long term capital gains and ordinary income, the concept of
long term capital gains remains and may, in certain circumstances be relevant.
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The grant of an Option that is not an incentive stock option (a
"non-qualified option") should not result in recognition of income by the
Optionee. Upon exercise of a non-qualified option by an employee who is not an
officer or director or who is not otherwise subject to the provisions of Section
16(b) of the Exchange Act ("Section 16(b)"), the excess of the fair market value
of the shares on the exercise date over the option price should be considered
compensation taxable as ordinary income to the employee. If the Optionee is
subject to the restrictions of Section 16(b), income will be recognized at the
time the restrictions lapse and should be measured by the excess of the fair
market value of the shares at such time over the option price unless the
Optionee elects to be taxed at the time of exercise. In the event of a sale of
the shares, any appreciation after the date of exercise or lapse of the
restriction of Section 16(b), as the case may be, should qualify as capital
gain.
In connection with incentive stock options and non-qualified options,
the Company will be entitled to a deduction for federal income tax purposes at
the same time and in the same amount as the ordinary income recognized by the
employee provided any Federal income tax withholding requirements are satisfied.
If applicable holding period requirements in connection with an incentive stock
option are not satisfied, no deduction will be available to the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT
YOU VOTE FOR THE 1998 STOCK OPTION PLAN
PROPOSAL NO. 3
MERGER INTO DELAWARE COMPANY
General
The Board of Directors has recommended that the Company merge (the
"Merger"), into X-Ceed, Inc., a Delaware corporation (the "Delaware Company"),
recently organized by the Company as a wholly-owned subsidiary solely for this
purpose. Under the terms of the Merger, each outstanding share of the Company's
Common Stock $.08 par value per share will be converted into one share of the
Delaware Company's Common Stock $.01 par value per share. The Company presently
has 125,000 shares of authorized Preferred Stock $.08 par value, none of which
has been issued. Outstanding options and warrants to purchase shares of the
Company's Common Stock will be converted into options or warrants to purchase
the same number of shares of the Delaware Company's Common Stock.
The purpose of the Merger is to change the place of incorporation of
the Company from New York to Delaware, thereby enabling the Company to enjoy the
benefits of certain provisions of Delaware law that the Board of Directors
believes would be more beneficial to the Company than the comparable provisions
of New York law. The Merger would not
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involve any change in the business, properties, management or capital structure
of the Company except that the par value of the Delaware Company's Common Stock
will be $.01 per share instead of $.08 per share and that the authorized Common
Stock of the Delaware Company will be 30,000,000 shares instead of 12,500,000
shares and the authorized Preferred Stock will be 1,000,000 shares instead of
125,000 shares. The par value of the Preferred shares will be $.05 per share
instead of $.08 per share. Upon the effective date of the Merger, the Delaware
Company will be the continuing corporation and will own all of the assets and
will be responsible for all of the liabilities of the Company.
Proposals to change the Company's name to X-Ceed, Inc. and to increase
the amount of authorized Common Stock to 30,000,000 shares, par value $.01 per
share, and the authorized Preferred Stock to 1,000,000 shares, par value $.05
per share, are being submitted separately in this Proxy Statement for
consideration at the Meeting. In the event that the Merger is approved, the
change of name and authorized stock will be accomplished in connection with the
Merger. In the event that the Merger is not approved but that the proposed
change of name and change in authorized stock are approved, the Company will
effect those actions by amending its New York Certificate of Incorporation.
Results of the Change to Delaware
Summarized below are the principal differences between the New York
Business Corporation Law and the Delaware General Corporation Law which may
affect the interests of stockholders. This summary does not purport to be a
complete statement of the differences between the New York Business Corporation
Law and the Delaware General Corporation Law and related laws affecting
stockholders' rights, and the summary is qualified in its entirety by reference
to the provisions of these laws. Stockholders of the Company are advised to
consult with their own legal counsel regarding all such matters.
General Flexibility Due to Lower Voting Requirements. With limited
exceptions, New York law requires that mergers, consolidations, sales of all or
substantially all of the assets of a corporation and other extraordinary
corporate transactions be approved by two-thirds of each class of stock
outstanding and entitled to vote thereon. Delaware law generally requires that
such actions be approved only by stockholders holding a majority of the shares
outstanding and entitled to vote thereon (and a majority of each class entitled
to vote as a class on such matters). These lower requirements will provide the
Board of Directors with greater flexibility in effecting extraordinary
transactions of which it approves.
Appraisal Rights. New York law provides stockholders with appraisal
rights in more situations than does Delaware law. Under New York law, a
stockholder may be entitled to appraisal when the stockholders vote (1) to sell
or exchange all or substantially all of its property and assets, or (2) to merge
or consolidate with other corporations. Delaware, for example, does not permit
appraisal rights in the event of a merger or consolidation for the shares of any
class or series which are listed on a national securities exchange or which are
held of record by more than two thousand stockholders. The Company's Common
Stock is listed on a national securities exchange.
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Loans to Directors. Under New York law, loans to directors are
prohibited unless approved by a majority of stockholders. Delaware law permits
loans to directors if approved by the Board of Directors; stockholder approval
is not required.
Employee Stock Options. New York law forbids New York corporations to
grant stock options to directors, officers or employees unless stockholder
approval is obtained. Delaware law permits the grant of such options upon Board
approval.
Increased Limitation of Directors' Liability. Under New York law, a
director is responsible to the corporation and its stockholders for damages for
breach of the director's fiduciary duty regardless of whether or not such breach
of duty arose from acts or omissions carried out in good faith or were performed
unintentionally or without knowing it was a violation of law. Under Delaware
law, if the Certificate of Incorporation so provides, directors' liability for
damages to the corporation or its stockholders can be eliminated if the
director's breach of fiduciary duty arises from acts or omissions taken in good
faith or which do not involve intentional misconduct or a knowing violation of
law or do not involve unlawful payment of dividends or unlawful stock purchases
or redemptions or do not involve transactions from which the director derived an
improper personal benefit.
Under New York law, in the event of litigation against an officer,
director or employee, the officer, director or employee can be indemnified as
authorized by the Board of Directors in the specific case and the officers and
directors are obligated to repay any advancements of expenses unless such
officer, director or employee has been wholly successful on the merits or
otherwise in defense of the action or proceeding. Under Delaware law,
indemnification can be provided in the Certificate of Incorporation for all
directors, officers and employees without reference to the specific case and the
directors, officers and employees are not obligated to repay an advancement of
expenses unless there is a specific determination made that the director,
officer or employee is not entitled to indemnification.
As litigation against officers and directors has increased, qualified
eligible individuals have been reluctant to serve as directors of corporations
even if such corporations have directors' liability insurance coverage. The
provisions of Delaware law limiting directors' liability and providing for
directors', officers' and employees' indemnification as recited above will be
incorporated in the Certificate of Incorporation of the Delaware Company and
will be of great assistance in attracting and retaining qualified persons to
serve on the Board of Directors of the Company.
Summary of Purpose and Provisions of the Delaware Company's Charter Documents
The purpose of the merger and the adoption of the Delaware Company's
Certificate of Incorporation and By-laws is to assure the continuity and
stability of the Company's business strategies and policies through the greater
limitation of directors' liability and indemnification to directors, officers
and employees of the Company as allowed under Delaware law and explained in the
immediate preceding section. Other than those
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additions in the Delaware Company's Certificate of Incorporation relating to the
limitation of directors liability, the Delaware Company's Certificate of
Incorporation and By-laws are basically the same as the Company's present
Certificate of Incorporation and By-laws.
The material benefits of the merger into the Delaware Company would be
to eliminate director's liability to the Company or its stockholders for breach
of his fiduciary duty if such breach of duty arose from acts or omissions
carried out in good faith or were performed unintentionally or without knowing
it was a violation of law or did not involve transactions from which a director
derived an improper personal benefit. The proposal does not eliminate or limit
the liability of a director for breaching his duty of loyalty, failing to act in
good faith, engaging in intentional misconduct or knowingly violating a law or
paying a dividend or approving a stock repurchase which is illegal under
Delaware law or obtaining an improper personal benefit.
This merger proposal would have no effect on the availability of
equitable remedies such as injunction or rescission against the director for
breach of fiduciary duty and is limited to future actions of directors and
officers acting in their capacity as directors nor does the proposal protect
directors from liability for violation of the Federal Securities laws.
That portion of the Delaware Company's Certificate of Incorporation and
By-laws that relates to indemnification includes indemnification of directors,
officers, employees or agents of the Company and allows indemnification to such
persons in the event of litigation against them without specific approval of
each litigation and without obligation to repay any advancement of such expenses
unless there is a specific determination made that the director, officer,
employee or agent is not entitled to such indemnification.
There has been no recent litigation involving the Board or its members
regarding the indemnification which may have been affected by the
indemnification provisions being proposed had they been in effect at the time.
Neither the Company nor any of its Board of Directors is aware of any
pending or threatened litigation against the Company or its Board of Directors
at this time.
All directors of the Company have a personal interest in seeing the
limitation of liability and indemnity provisions set forth on the Delaware
Company's Certificate of Incorporation approved and all directors and officers
intend to vote their stock in favor of the merger proposal. The Board of
Directors recommends a vote in favor of the merger proposal.
The stockholders, by voting for the adoption of this merger proposal
limiting directors' liability and providing for indemnity for officers,
directors, employees and agents of the Company, are estopped from a later claim
that any such limitation of liability or agreement of indemnity were invalid.
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The Company was incorporated under the law of the State of New York in
1979. It is the opinion of the Board of Directors of the Company that certain
provisions of Delaware's corporate law make it advantageous for the Company to
change its state of incorporation to Delaware. This objective will be
accomplished through a "migratory merger," some of the principal features of
which are as follows.
(1) The Company will be merged into the newly-created Delaware company,
which will be the survivor of the merger.
(2) Subject to the applicable provisions regarding appraisal rights of
the Company's stockholders who file a written objection to the proposed Merger,
each share of the Company's Common Stock issued and outstanding on the effective
date of the Merger will automatically become one share of Common Stock of the
Delaware Company.
(3) For Federal income tax purposes, the Company is of the opinion that
no gain or loss will be recognized by the Company's stockholders, except those
who exercise their appraisal rights.
(4) The Delaware Company will succeed to the business of the Company,
and the stockholders of the Company will become stockholders of the Delaware
Company.
(5) The Merger is not intended to effect any change in the business,
property, management or capitalization of the Company except that the par value
of the Delaware Company's Common Stock will be $.01 per share instead of $.08
per share and that the authorized Common Stock of the Delaware Company will be
30,000,000 shares instead of 12,500,000 shares and Preferred Stock will be
1,000,000 shares $.05 par value per share, instead of 125,000 shares, $.08 par
value per share.
(6) The rights of the Company's stockholders, who upon consummation of
the Merger will become stockholders of the Delaware Company, will be governed by
the laws of the State of Delaware and by the terms and provisions of the
Certificate of Incorporation and By-laws of the Delaware Company.
Stockholders have the right to dissent from the Merger and to demand
and receive appraisal rights for their shares of Common Stock in the Company by
complying with the requirements of Section 623 of the Business Corporation Law
of the State of New York. See "Right to Dissent and Appraisal Rights of
Stockholders Objecting to the Proposed Merger. Dissenting Stockholders are urged
to consult their tax advisors as to the federal, state or local tax consequences
of the Proposed Merger.
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The Merger
It is presently anticipated that the date on which the Merger will be
consummated (the "Effective Date") will be March 3, 1998 or as soon thereafter
as practicable. However, the Board of Directors of the Company has reserved the
right to abandon the Merger prior to the Effective Date of the Merger. See
"Termination."
The officers and Directors serving the Company on the Effective Date of
the merger will thereupon hold the same offices with Delaware Company.
Upon the Effective Date of the Merger each share of Common Stock of the
Company will be converted automatically into one share of Common Stock of the
Delaware Company and thereafter the outstanding certificates for shares of the
Company's Common Stock will represent the same number of shares of Common Stock
of the Delaware Company. It will not be necessary for holders of shares of the
Company's Common Stock to exchange their existing stock certificates for stock
certificates of the Delaware Company. However, any stockholders desiring new
certificates of the Delaware Company may submit their existing certificates
representing shares of the Company to American Stock Transfer & Trust Company,
the transfer agent of the Delaware Company, and obtain new certificates.
Capital Stock of the Delaware Company
The Certificate of Incorporation of the Delaware Company will authorize
31,000,000 shares of which 30,000,000 shares are Common Stock having a par value
of $.01 per each and 1,000,000 shares are Preferred Stock having a par value of
$.05 per share. As mentioned, except for those shares purchased from dissenting
stockholders pursuant to their appraisal rights, each of the currently
outstanding 7,043,180 shares of the Company's Common Stock will be exchanged for
one share of the Delaware Company's Common Stock. The Common Stock of the
Delaware Company, like the Common Stock of the Company, will have no preemptive,
conversion, redemption or similar rights. Upon the liquidation of the Delaware
Company, the holders of Common Stock would be entitled to share ratably in the
net assets available for distribution to stockholders. Since the shares of
Common Stock of the Delaware Company, like those of the Company, do not have
cumulative voting rights, the holders of more than 50% of the shares voting for
the election of directors can elect 100% of the directors if they choose to do
so.
Right to Dissent and Appraisal Rights of Stockholders Objecting to the Proposed
Merger
Section 910 of the New York Business Corporation Law ("BCL") sets forth
the rights of stockholders of the Company who object to the Merger. Any
stockholder of the Company who does not vote in favor of the Merger, or who duly
revokes his vote in favor of the Merger may, if the Merger is consummated,
obtain payment in cash of the fair value of his shares by complying with the
requirements of Section 623 of the BCL. The
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dissenting stockholder must file with the Company, before the taking of the vote
on the Merger proposal, a written objection including a statement of intention
to dissent, his name and residence address, the number and class of shares as to
which he dissents (which number must not be less than all his shares) and demand
for payment for his shares if the Merger is consummated. Within ten days after
the vote of stockholders authorizing the Merger, the Company must give written
notice of such authorization to each dissenting stockholder. At the time of
filing the notice of election to dissent or within one month thereafter, the
stockholder must submit the certificates representing his shares to the Company
or its transfer agent for notation thereon of the election to dissent, after
which such certificates will be returned to the stockholder. Failure to submit
the certificates will result in the loss of the dissenter's appraisal rights.
Within fifteen days after the expiration of the period within which stockholders
may file their notices of election to dissent or within fifteen days after
consummation of the Merger, whichever is later (but not later than 90 days after
the stockholders' vote authorizing the Merger), the Company (or, if the Merger
is already consummated, the Delaware Company) must make a written offer (which,
if the Merger has not been consummated, may be conditioned upon such
consummation) to each stockholder who has filed such notice of election to pay
for his shares at a specified price which the Company considers to be fair
value. If the Company and the dissenting stockholder are unable to agree as to
such value, section 623 of the BCL provides for judicial determination of value.
ln the event of such a disagreement, a court proceeding shall be commenced by
the Company in the Supreme Court of the State of New York, County of New York,
60 Centre Street, New York, New York or by the dissenting stockholder if the
Company fails to commence the proceeding within the time required by Section
623. The Company intends to timely commence such a proceeding in the event of
such a disagreement. A negative vote on the Merger does not constitute a
"written objection" required to be filed by an objecting stockholder. An
abstention from voting on the Merger or failure to specify any vote on the proxy
card will not constitute a waiver of rights under Section 910 and 623 of the BCL
provided that a written objection has been properly filed.
The foregoing summary does not purport to be a complete statement of
the provisions of Sections 910 and 623 of the BCL and is qualified in its
entirety by reference to those Sections copies of which are attached hereto as
Exhibit B.
A dissenting stockholder who receives payment for his shares upon
exercise of his right of appraisal will, subject to the provisions of Section
302(b) of the Internal Revenue Code, recognize capital gain or loss for Federal
income tax purposes, measured by the difference between the basis for his shares
and the amount of payment received. Stockholders who may dissent and seek right
of appraisal should consult with their tax advisors.
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Termination
The Board of Directors may terminate and cancel the Merger at any time
prior to the Effective Date thereof, either before or after submission of the
Merger to a vote of stockholders.
Voting
The affirmative vote of at least two-thirds in interest of stockholders
having voting powers shall be necessary for the adoption of the proposed Merger.
As the sole stockholder of the Delaware Company, the Company has authorized the
Merger for the Delaware Company.
Members and affiliates of the Company's Board of Directors and
affiliates of the Company, who own in the aggregate approximately 35.4% of the
total number of shares entitled to vote, intend to vote for the Merger.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
FOR THE MERGER INTO A DELAWARE COMPANY.
PROPOSAL NO. 4
CHANGING THE COMPANY'S NAME TO X-CEED, INC.
The Board of Directors has approved an amendment to the Certificate of
Incorporation which would change the name of the Company from Water-Jel
Technologies, Inc. to X-Ceed, Inc. The Board believes that by using the trade
name of the Company's largest division., the X-Ceed Performance Group, in its
corporate name, the Company will promote recognition of the trade name, identify
the Company with its principal products and services and more accurately reflect
in its name what the Company's business is about. The Company currently plans to
implement the change of name when it would be most cost efficient with regard to
the utilization of current supplies of packaging, stationery, etc. The Company
anticipates that the cost of publicizing the change of name will not be
significant.
In the event that the Merger is approved, the Company will effect the
change of name in connection with the Merger rather than by amendment of its New
York Certificate of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE CHANGE
OF THE COMPANY'S NAME TO X-CEED, INC.
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PROPOSAL NO. 5
INCREASING THE AMOUNT OF AUTHORIZED COMMON STOCK
At the meeting, stockholders will be asked to adopt an amendment to the
Company's Certificate of Incorporation to increase the number of authorized
shares of the Company's Common Stock to 30,000,000 shares, par value of $0.01
per share and to increase the authorized shares of Preferred Stock to 1,000,000,
par value of $.05 per share (the "Proposed Stock Amendment"). The Company's
Board of Directors has approved the Proposed Stock Amendment, subject to
stockholder authorization.
At December 15, 1997, the authorized capital of the Company consisted
of 12,500,000 shares of Common Stock, par value $0.08 per share and 125,000
shares of non-designated Preferred Stock, par value $0.08 per share. As of that
date, 7,043,180 shares of Common Stock were outstanding and no shares of
Preferred Stock were outstanding. In addition, at that date, an aggregate of
5,088,588 shares of Common Stock were reserved for issuance upon: (1) exercise
of options which may be granted under the Company's Non-Qualified Stock Option
Plan (140,625 shares), (ii) exercise of options which may be granted under the
Company's 1990 Stock Option Plan (187,500 shares), (iii) exercise of options
which may be granted under the Company's 1995 Stock Option Plan (484,000
shares), (iv) exercise of the Company's outstanding public warrants (1,559,854
shares issuable pursuant to Class A Warrants and 1,766,623 shares issuable
pursuant to Class B Warrants), (v) exercise of Warrants granted to the
underwriter in connection with a public offering of the Company's securities
(529,986 shares), and (vi) exercise of various other outstanding warrants and
options (420,000). Therefore, the Company will have issued or reserved for
issuance a total of 12,109,738 shares of the 12,500,000 shares of Common Stock
currently authorized for issuance.
If the Proposed Stock Amendment is adopted by the Company's
stockholders, the additional shares of Common Stock would be issuable at any
time and from time to time, by action of the Board of Directors without further
authorization from the Company's stockholders, except as otherwise required by
applicable law or rules and regulations to which the Company may be subject, to
such persons and for such consideration (but not less than the par value
thereof) as the Board of Directors determines.
After taking into account the currently issued and reserved shares of
Common Stock discussed above, the Company would have only 435,263 shares of
Common Stock authorized which are not issued or reserved for future issuance.
The Company's Board of Directors believes that the authorization of the
additional shares of Common Stock are in the best interests of the Company and
its stockholders so that sufficient shares will be readily available for use, if
feasible, in acquisitions, in raising additional capital and for grants as
incentives to employees, officers, directors and consultants of the Company.
The Company presently has no understandings or arrangements which would
require the issuance of any of the additional shares of Common Stock which are
proposed
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to be authorized. However, management believes that the increase in the number
of authorized shares of Common Stock is in the best interest of the Company and
its stockholders since additional shares of Common Stock will provide the
Company with the flexibility of having a broader choice in the type and number
of equity securities available to it for the above corporate purposes. Due to
the Board of Directors' discretion in connection with the issuance of additional
shares of Common Stock to be issued in a private placement, it would, under
certain circumstances, be in a better position to respond to a tender offer or
other attempt to gain control of the Company. For example, issuance of
additional shares would increase the number of shares outstanding and could
necessitate the acquisition of a greater number of shares by a person making a
tender offer and could make such acquisition more difficult since the recipient
of such additional shares may favor the incumbent management.
In addition to increasing the authorized amount of Common stock, the
Proposed Stock Amendment will change the par value of the Company's Common Stock
and Preferred Stock from $.08 per share to $.01 per share, and $.08 per share to
$.05 per share, respectively. The par value of $.08 per share resulted from the
Company's eight-to-one reverse stock split in 1994. The Board of Directors
believes that this par value is unusual and could result in misunderstandings
among the investing public.
In the event that the Merger is approved, the Company will effect the
Proposed Stock Amendment in connection with the Merger rather than by amendment
of its New York Certificate of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
INCREASE IN THE AMOUNT OF AUTHORIZED COMMON STOCK TO
30,000,000 SHARES.
PROPOSAL NO. 6
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Subject to approval by the stockholders, the Board of Directors has
appointed Holtz Rubenstein & Co. LLP as the independent public accountants to
audit the financial statements of the Company for the fiscal year ending August
31, 1998. Holtz Rubenstein & Co. LLP also served as the Company's auditors for
the fiscal years ended August 31, 1995, 1996 and 1997. It is expected that a
representative of Holtz Rubenstein & Co. LLP will be present at the Annual
Meeting.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR
RATIFICATION OF THE APPOINTMENT OF HOLTZ RUBENSTEIN & CO., LLP
AS INDEPENDENT ACCOUNTANTS.
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VOTE REQUIRED
Under New York law, the affirmative vote of the holders of a two thirds
of the shares of stock of the Company entitled to notice of, and to vote at, the
Annual Meeting is required to adopt the proposed merger in the Delaware Company.
The affirmative vote of a majority of the votes cast at the Annual Meeting is
required to approve the selection of auditors, adoption of the 1998 Stock Option
Plan and amendment of the Certificate of Incorporation to change the Company's
name to X-Ceed, Inc., to increase the amount of authorized Common Stock to
30,000,000 shares, and the authorized Preferred Stock to 1,000,000 Shares, and
to change the par value of the Common Stock to $.01 per share, and to the par
value of the Preferred Stock to $.05 per share. The affirmative vote of a
plurality of the votes cast at the Annual Meeting is required to elect
directors.
EXPENSE OF SOLICITATION
The cost of soliciting proxies, which also includes the preparation,
printing and mailing of this Proxy Statement, will be borne by the Company.
Solicitation will be made by the Company primarily through the mail. The Company
may also retain the services of a proxy solicitation firm. The Company has not
made any arrangements to do so as of the date of this Proxy Statement, and does
not presently have estimates as to the cost of such services. Directors,
officers and regular employees of the Company may solicit proxies personally, by
telephone or telegram. The Company will request brokers and nominees to obtain
voting instructions of beneficial owners of stock registered in their names and
will reimburse them for any expenses incurred in connection therewith.
PROPOSALS OF STOCKHOLDERS
Stockholders of the Company who intend to present a proposal for action
at the 1998 Annual Meeting of Stockholders of the Company must notify the
Company's management of such intention by notice received at the Company's
principal executive offices not later than September 1, 1998, for such proposal
to be included in the Company's proxy statement and form of proxy relating to
such Meeting.
ANNUAL REPORT TO STOCKHOLDERS
The Company's Annual Report to Stockholders for the year ended August
31,1997 is being delivered with this Proxy Statement to the Company's
stockholders.
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OTHER MATTERS
The Board of Directors knows of no matters that are expected to be
presented for consideration at the Annual Meeting which are not described
herein. However, if other matters properly come before the Meeting, it is
intended that the persons named in the accompanying proxy will vote thereon in
accordance with their best judgment.
PLEASE DATE, SIGN AND RETURN THE PROXY CARD AT YOUR EARLIEST CONVENIENCE IN THE
ENCLOSED RETURN ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
A PROMPT RETURN OF YOUR PROXY CARD WILL BE APPRECIATED AS IT WILL SAVE THE
EXPENSE OF FURTHER MAILINGS.
By Order of the Board of Directors
Werner Haase, Chairman
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WATER-JEL TECHNOLOGIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
February 20, 1998 10:00 a.m.
The undersigned hereby appoints Werner G. Haase and Nurit Kahane Haase,
and each of them jointly and severally, proxies with full power of substitution
and revocation, to vote on behalf of the undersigned all shares of Common Stock
of Water-Jel Technologies, Inc. which the undersigned is entitled to vote at the
Annual Meeting of Stockholders to be held February 20, 1998 or any adjournments
thereof.
1. ELECTION OF DIRECTORS.
FOR all the nominees listed below ()
WITHHOLD AUTHORITY to vote for all nominees listed below ()
(INSTRUCTION: To withhold authority to vote for any individual nominee,
mark the box next to the nominee's name below.)
Werner Haase () Norman Doctoroff () John A. Bermingham ()
2. PROPOSAL TO APPROVE THE CREATION OF A NEW 1998 STOCK OPTION PLAN
AUTHORIZING THE COMPANY TO ISSUE OPTIONS TO ACQUIRE UP TO 2,000,000
SHARES OF COMMON STOCK TO OFFICERS, KEY EMPLOYEES AND OTHERS WHO RENDER
SERVICES TO THE COMPANY.
FOR () AGAINST () ABSTAIN ()
3. PROPOSAL TO APPROVE THE MERGER INTO A DELAWARE COMPANY.
FOR () AGAINST () ABSTAIN ()
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4. PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO CHANGE
THE COMPANY'S NAME TO X-CEED, INC.
FOR () AGAINST () ABSTAIN ()
5. PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO INCREASE THE
AUTHORIZED COMMON STOCK TO 30,000,000 SHARES, PAR VALUE $.01 PER SHARE
AND THE AUTHORIZED PREFERRED TO 1,000,000 SHARES, PAR VALUE $.05 PER
SHARE.
FOR () AGAINST () ABSTAIN ()
6. PROPOSAL TO RATIFY APPOINTMENT OF HOLTZ RUBENSTEIN & CO., LLP,
AS THE INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE
1998 FISCAL YEAR.
FOR () AGAINST () ABSTAIN ()
In his discretion, the proxy is authorized to vote upon such other
business as may properly come before the meeting or any adjournment(s) thereof.
(Continued and to be signed on reverse side.)
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THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED TO
ELECT MESSRS. HAASE, DOCTOROFF, AND BERMINGHAM AS DIRECTORS, TO APPROVE A NEW
1998 STOCK OPTION PLAN, TO APPROVE THE MERGER INTO A DELAWARE COMPANY, TO
APPROVE AMENDMENTS TO THE CERTIFICATE OF INCORPORATION CHANGING THE COMPANY'S
NAME TO X-CEED, INC. AND INCREASING THE AMOUNT OF AUTHORIZED COMMON STOCK TO
30,000,000 SHARES, PAR VALUE $.01 PER SHARE, AND TO APPROVE THE APPOINTMENT OF
HOLTZ RUBENSTEIN & CO., LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR
THE FISCAL YEAR ENDING AUGUST 31,1998.
Dated:_______________________________
------------------------------------
Signature
------------------------------------
Signature if held jointly
(Please sign exactly as ownership appears on this proxy. Where stock
is held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign
in partnership name by authorized person.)
Please mark, date, sign and
return Proxy in the enclosed envelope.
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EXHIBIT A
WATER-JEL TECHNOLOGIES, INC.
1998 STOCK OPTION PLAN
There is hereby established a 1998 Stock Option Plan (the "Plan"). The
Plan provides for the grant to certain employees and others who render services
to Water-Jel Technologies, Inc. (the "Company") or of any subsidiary thereof, of
options to purchase shares of the common stock, $.08 par value per share, of the
Company ("Options") and for the issuance, transfer or sale of such common stock
upon the exercise of such Options. The term "Company", as used in the Plan,
shall include Water-Jel Technologies, Inc. and any present or future subsidiary
thereof, unless the context otherwise requires. It is intended that certain of
the Options will constitute Incentive Stock Options within the meaning of
Section 422A of the Internal Revenue Code ("ISOs"), and the remainder of the
Options will constitute nonstatutory options ("Nonstatutory Options"). The Board
of Directors of the Company or a committee thereof appointed by the Board (the
term "Committee" as used herein shall refer to either such committee or the
Board of Directors as a whole, as the case may be) shall determine which Options
are to be ISOs and which are to be Nonstatutory Options and shall enter into
option agreements with the recipients accordingly.
1. Purpose: The purpose of the Plan is to provide additional
incentive to the officers, key employees, and others who render services to the
Company, who are primarily responsible for the management and growth of the
Company, or otherwise materially contribute to the conduct and direction of its
business, operations and affairs, in order to strengthen their desire to remain
in the employ of the Company, stimulate their efforts on behalf of the Company
and to retain and attract persons of competence, and, by encouraging ownership
of a stock interest in the Company, to gain for the organization the advantages
inherent in employees and others who render services to the Company having a
sense of proprietorship.
2. The Stock: The aggregate number of shares of common stock,
$.08 par value per share, which may be issued, transferred or sold upon the
exercise of Options granted under the Plan shall not, except as such number may
be adjusted in accordance with paragraph (g) of Article 6 hereof, exceed
2,000,000 shares of the common stock, $.08 par value per share, of the Company
("Common Shares") which may be either authorized and unissued common stock, $.05
par value per share, or issued common stock, $.05 par value per share,
reacquired by the Company. Notwithstanding the above limitation, if any Option
granted under the Plan shall expire, terminate or be canceled for any reason
without having been exercised in full, the corresponding number of unpurchased
shares shall again be available for the purposes of the Plan.
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3. Employees: The term "employees" as used in the Plan, shall
mean officers and other employees of the Company (including officers and other
employees who are also directors) within the classes referred to in Article 1
hereof.
4. Eligibility:
(a) Options may be granted to such employees of (or, in the case of
Nonstatutory Options only, to others who render services to) the Company or its
subsidiaries or parent as the Committee shall select from time to time (the
"Optionees"). The term "subsidiary" and "parent" as used in the Plan shall have
the respective meanings set forth in Sections 425(f) and (e) of the Internal
Revenue Code.
(b) No individual who, at the time an ISO is granted, is considered under
Section 422A(b)(6) of the Internal Revenue Code as owning stock possessing more
than 10 percent of the total combined voting power of all classes of stock of
the Company or of its parent or any subsidiary corporation shall be eligible to
receive such ISO, provided that this restriction shall not apply if at the time
such ISO is granted the provisions of 7(f)(ii) are complied with.
(c) An Optionee may hold more than one Option.
5. Subsidiary: The term "subsidiary", as used herein, shall be
deemed to mean any corporation (other than Water-Jel Technologies, Inc.) in an
unbroken chain of corporations beginning with and including Water-Jel
Technologies, Inc. if, at the time of the granting of an Option, each of the
corporations other than the last corporation in said unbroken chain owns stock
possessing 50 percent or more of the total combined voting power of all classes
of stock in one of the other corporation in such chain.
6. General Terms of Options:
(a) Consideration : The Committee shall determine the consideration to the
Company, for the granting of Options under the Plan, as well as the conditions,
if any, which it may deem appropriate to ensure that such consideration will be
receive by, or will accrue to the Company and, in the discretion of the
Committee, such consideration need not be the same, but may vary for Options
granted under the Plan at the same time or from time to time.
(b) Number of Options which may be Granted to, and Number of Common Shares
which may be Acquired by Employees. The Committee may grant more than one Option
to an individual during the life of the Plan and, subject to the requirements of
Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"), with
respect to incentive stock options, such Option may be in addition to, in tandem
with, or in substitution for, Options previously granted under the Plan or of
another corporation and assumed by the Company.
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The Committee may permit the voluntary surrender of all or a
portion of any Option granted under the Plan to be conditioned upon the granting
to the employee of a new Option for the same or a different number of Common
Shares as the Option surrendered, or may require such voluntary surrender as a
condition precedent to a grant of a new Option to such employee. Such new Option
shall be exercisable at the price, during the period, and in accordance with any
other terms or conditions specified by the Committee at the time the new Option
is granted, all determined in accordance with the provisions of the Plan without
regard to the price, period of exercise, or any other terms or conditions of the
Option surrendered (except as otherwise provided in paragraph (f) of Article 7
hereof).
(c) Period of Grant of Options. Options under the Plan may be granted at
any time after the Plan has been approved by the stockholders of the Company.
However, no Option shall be granted under the Plan after March 1, 2008.
(d) Option Agreement. The Company shall effect the grant of Options under
the Plan, in accordance with determinations made by the Committee by execution
of instruments in writing in a form approved by the Committee. Each Option shall
contain such terms and conditions (which need not be the same for all Options,
whether granted at the time or at different times) as the Committee shall deem
to be appropriate and not inconsistent with the provisions of the Plan, and such
terms and conditions shall be agreed to in writing by the Optionee. The
Committee may, in its sole discretion, and subject to such terms and conditions
as it may adopt, accelerate the date or dates on which some or all outstanding
Options may be exercised. Options shall be exercised by submitting to the
Company a signed copy of notice of exercise in a form to be supplied by the
Company. The exercise of an Option shall be effective on the date on which the
Company receives such notice at its principal corporate offices.
(e) Supplemental Cash Award. Upon issuance of any Common Shares to an
Optionee pursuant to the exercise of a Non-statutory Option that may be granted
hereunder, the Company or a Subsidiary may issue a supplemental cash award to
the Optionee at the time that the stock certificates representing such common
stock are issued to him. The supplemental cash award shall be the smaller of
(i) 65% of the difference between the fair market value of the Common
Shares issued at the time of exercise and the option price tendered by the
Optionee for the Common Shares or
(ii) 90% of the Option price tendered by the Optionee pursuant to the
exercise of Options hereunder.
The Company (or its Subsidiary) may withhold from this supplemental
cash award all required amounts including that which may be required as a result
of the Optionee's exercise of the option.
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(f) Non-Transferability of Option. No Option granted under the Plan to an
Optionee shall be transferable by the Optionee or otherwise than by will or by
the laws of descent and distribution and during the Optionee's lifetime, such
Option shall be exercisable only by such Optionee.
(g) Effect of Change in Common Stock. In the event of a reorganization,
recapitalization, liquidation, stock split, stock dividend, combination of
shares, merger or consolidation, or the sale, conveyance, lease or other
transfer by the Company of all or substantially all of its property, or any
change in the corporate structure or shares of common stock of the Company
pursuant to any of which events the then outstanding shares of the common stock
are split up or combined or changed into, become exchangeable at the holder's
election for, or entitle the holder thereof to other shares of common stock, or
in the case of any other transaction described in Section 425(a) of the Code,
the Committee may change the number and kind of shares of Common Shares
available under the Plan and any outstanding Option (including substitution of
shares of common stock of another corporation) and the price of any Option and
the fair market value determined under paragraph (i) of Article 6 hereof in such
manner as it shall deem equitable. Options granted under the Plan shall contain
such provisions as are consistent with the foregoing with respect to adjustments
to be made in the number and kind of Common Shares covered thereby and in the
option price per share in the event of any such change.
(h) Optionees not Stockholders. An Optionee or a legal representative
thereof shall have none of the rights of a stockholder with respect to Common
Shares subject to Options until such shares shall be issued, transferred or sold
upon exercise of the Option.
(i) Fair Market Value. As used in the Plan, the term "fair market value"
shall (i) if the common stock of the Company is traded in the over-the-counter
market, be the mean between the closing bid and asked sales prices for the
common stock of the Company as reported by the National Quotation Bureau (or
similar quotation agency) on the date the calculation thereof shall be made or
(ii) if the common stock of the Company is listed on a national securities
exchange, be the mean between the high and low sales prices for the common stock
of the Company on such exchange on the date the calculation thereof shall be
made, in each case with such adjustments, if any, as shall be made in accordance
with paragraph (g) of this Article 6. In the event the date of calculation shall
be a date on which there shall not have been reported a closing bid and asked
price for common stock of the Company or a date which shall not be a trading
date on such national securities exchange as the case may be, determination of
fair market value shall be made as of the first date prior thereto on which
there shall have been reported a closing bid and asked price for common stock of
the Company or the first date prior thereto which shall have been a trading date
on such national securities exchange, as the case may be.
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(j) Types of Options. Options granted under the Plan shall be in the form
of (i) incentive stock options as defined in Section 422A of the Code, or (ii)
options not qualifying under such Section, or both, in the discretion of the
Committee. The status of each Option shall be identified in the Option
Agreement.
7. Terms of Options:
(a) Option Price. The price or prices per share of Common Shares to be sold
pursuant to an Option shall be such as shall be fixed by the Committee but not
less in any case than the fair market value per share for such Common Shares in
the case of Incentive Stock Options, or 85% of the fair market value in the case
of Nonstatutory Options on the date of the granting of the Option, subject to
adjustment pursuant or paragraph (g) of Article 6 hereof. For the purposes of
this Article 7, the date of the granting of an Option under the Plan shall be
the date fixed by the Committee as the date for such Option for the person who
is to be the recipient thereof.
(b) Period of Option Vesting. (i) Unless otherwise determined by the
Committee or by other provisions of the Plan, upon the granting of any Option
such Option will be vested and be exercisable with respect to the percentage of
the Common Shares subject to the Option as determined by the Committee. The
Committee may, in its discretion, (A) provide for the holding of such Common
Shares in escrow for a period not exceeding five years, or (B) impose other
restrictions on the vesting of any Option or the vesting of any Common Shares
that an Optionee receives upon exercise of any Option; provided that any and all
such restrictions shall lapse if there is a sale of (A) substantially all of the
assets or (B) 50 percent or more of the voting securities of the Company
(excluding for this purpose Company stock sold in a primary or secondary public
offering). Any restrictions the Committee imposes on an Option pursuant to this
paragraph shall be specified in the stock option agreement governing such
Option.
(ii) Options will be exercisable thereafter over the Option Period which,
in the case of each Option, shall be for a period of not more than ten years
from the date of the grant of such Option, and, subject to the provisions of
paragraphs 4(b) or 6(d), will be exercisable, at such times and in such amounts
as determined by the Committee at the time each Option is granted.
Notwithstanding any other provision contained in the Plan, no Option shall be
exercisable after the expiration of the Option Period. Except as provided in
paragraphs (c) and (d) of this Article 7, no Option may be exercised unless the
Optionee is then in the employ of the Company and shall have been continuously
so employed since the date of the grant of such Option. The Plan shall not
convey upon any Optionee any right with respect to continuation of employment by
the Company, nor shall it interfere in any way with the employee's right or the
Company's right to terminate employment at any time.
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(c) Termination of Optionee's Employment or Other Services.
(i) In the event of the termination of an Optionee's employment with or
rendering of other services to the Company, any parent or subsidiary of the
Company, and any successor corporation to either the Company or any parent or
subsidiary of the Company other than by reason of death, all Options previously
granted to such Optionee shall terminate, except with respect to Options which
the Optionee was entitled to exercise prior to the date of such termination (the
"Termination Date").
(ii) With respect to any Option which the Optionee was entitled to exercise
prior to the Termination Date but had not as yet done so as of such date, such
Option will lapse unless exercised by the Optionee within the earlier of (A)
thirty days after the Termination Date or (B) the last date such Option could
have been exercised had the Optionee's position with the Company not terminated.
Nothing in the Plan or in any Option or stock option agreement shall confer on
any Optionee any right to continue in the service of the Company or any parent
or subsidiary of the Company or interfere with the right of Company to terminate
such Optionee's employment or other services at any time.
(iii) In the event that termination of an Optionee's services results from
(A) the Optionee having been convicted of a felony, a crime of moral turpitude
or any crime involving the Company (other than pursuant to actions taken at the
direction or with approval of the Committee), or (B) a determination by the
Committee that the Optionee was engaged in fraud, misappropriation or
embezzlement, the Company shall have the right, exercisable within 60 days of
the Termination Date, to repurchase any Common Shares acquired by the Optionee
pursuant or this Plan and owned by the Optionee at the Termination Date at the
lower of (A) the option price of such Common Shares, (B) if such Common Shares
are not publicly traded, their book value on the Termination Date, or (C) if
such Common Shares are publicly traded, the average of their high and low market
price on the Termination Date.
(d) Death of Optionee. If an Optionee should die while in the employ of the
Company, the Option theretofore granted shall be exercisable by the estate of
the Optionee or by a person who acquired the right to exercise such Option by
bequest or inheritance or by reason of the death of the Optionee, but then only
if and to the extent that the Optionee was entitled to exercise the Option at
the date of death, giving effect to the limitations, if any, which may have been
imposed by the Committee pursuant or paragraph (b)(ii) of this Article 7 with
respect to the percent of the total number of Common Shares to which the Option
relates which may be purchased from time to time during the Option Period;
provided, however, that such Option shall be exercisable only within the
twelve-month period next succeeding the death of the Optionee and in no event
after the expiration of the Option Period.
(e) Payment for Common Shares. Upon exercise of an Option, the Optionee
shall make full payment of the Option Price (i) in cash; (ii) with the common
stock of the Company (valued at their fair market value, as determined by the
Committee, as of
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such date of exercise), (iii) with the consent of the Committee with a full
recourse interest bearing promissory note of the Optionee, secured by a pledge
of the Common Shares received upon exercise of such Option, and having such
other terms and conditions as determined by the Committee, or (iv) with the
consent of the Committee, any combination of (i),(ii), or (iii) above.
(f) Incentive Stock Options. Options granted in the form of incentive stock
options shall be subject in addition to the foregoing provisions of this Article
7, to the following provisions:
(i) Aggregate Fair Market Value Limitation. The aggregate fair market value
(determined at the time the Option is granted) of the stock with respect to
which incentive stock options are exercisable for the first time by an Optionee
during any calendar year (under all such plans of the Company, its parent or
subsidiary) shall not exceed $100,000.
(ii) Ten Percent Shareholder. Any stock option granted to any individual
who, at the time of the proposed grant, owns common stock possessing more than
ten percent of the total combined voting power of all classes of stock of the
Company or any subsidiary shall, in addition to such other terms as may be
required by this Article 7(f) provide that (A) the prices per share for Common
Shares to be sold pursuant or such incentive stock option shall not be less than
110% of the fair market value per share for such Common Shares on the date of
the granting of the incentive stock option, subject to adjustment pursuant to
paragraph (g) of Article 6 hereof and (B) the Option Period of such incentive
stock option shall be for a period of not more than five years from the date of
the grant of such incentive stock option.
The Company intends that Options designated by the Committee
as incentive stock options shall constitute incentive stock options under
Section 422A of the Code. Should any of the foregoing provisions not be
necessary in order to so comply or should any additional provisions be required,
the Board of Directors of the Company may amend the Plan accordingly without the
necessity of obtaining the approval of the stockholders of the Company.
8. Withholding Taxes:
(a) In the case of Common Shares that an Optionee receives pursuant to his
exercise of an Option, the Company shall have the right to withhold from any
salary, wages, or other compensation for services payable by the Company to such
Optionee, amounts sufficient to satisfy any withholding tax liability
attributable to such Optionee's receipt of such Common Shares or the
supplemental cash award.
(b) In the case of Common Shares that an Optionee receives pursuant to his
exercise of an Option which is an ISO, if such Optionee disposes of such Common
Shares within two years from the date of the granting of the ISO or within one
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year after the transfer of such Common Shares to him, the Company shall have the
right to withhold from any salary, wages, or other compensation for services
payable by the Company to such Optionee, amounts sufficient to satisfy any
withholding tax liability attributable to such disposition.
(c) In the case of a disposition described in Section 8(b) above, the
Optionee shall give written notice to the Company of such disposition within 30
days following the disposition within 30 days following the disposition, which
notice shall include such information as the Company may reasonably request to
effectuate the provisions hereof.
9. Agreements and Representations to Optionees:
(a) As a condition to the exercise of an Option, unless counsel to the
Company opines that it is not necessary under the Securities Act of 1933, as
amended, and the pertinent rules thereunder, as the same are then in effect, the
Optionee shall represent in writing that the Common Shares being purchased are
being purchased only for investment and without any present intent at the time
of the acquisition of such Common Shares to sell or otherwise dispose of the
same.
(b) In the event there is a stockholders agreement in effect among the
Company and shareholders owning more than 50% of the Company's common stock (the
"Shareholders"), or among substantially all the Shareholders, which agreement
deals with restrictions on the disposition of shares of common stock, then, as a
further condition to the exercise of an Option, the Optionee may be required to
execute appropriate papers, making him a party to such agreement or agreements,
or such part thereof as the Committee determines would be in the best interests
of the Company and the Shareholders.
10. Administration of the Plan: The Plan shall be administered
by the Board of Directors or by a Committee which shall consist of three or more
members of the Board of Directors whom the Board of Directors may appoint from
time to time (either the Board or such committee, as the case may be, being
referred to herein as the "Committee"). Subject to the express provisions of the
Plan, the Committee shall have authority, in its discretion, to determine the
individuals to receive Options, the times when they shall receive them and the
number of Common Shares to be subject to each Option. Directors, including those
that may be members of the Committee, shall be eligible to receive Options under
the Plan.
Subject to the express provisions of the Plan, the Committee
shall also have authority to construe the respective option agreements and the
Plan, to prescribe, amend and rescind rules and regulations relating to the
Plan, to determine the terms and provisions of the respective option agreements
(which need not be identical) and to make all other determinations necessary or
advisable for administering the Plan. The Committee may correct any defect or
supply any omission or reconcile any inconsistency in the Plan
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or in any option agreement in the manner and to the extent it shall deem
expedient to carry it into effect, and it shall be the sole and final judge of
such expediency. The determinations of the Committee on the matters referred to
in this Section 10 shall be conclusive.
11. Amendment and Discontinuance of the Plan:
(a) The Board of Directors of the Company may at any time alter, suspend or
terminate the Plan, but, except in accordance with the provisions of paragraph
(g) of Article 6 and Article 12 hereof, no change shall be made which will have
a material adverse effect upon any Option previously granted, unless the consent
of the Optionee is obtained; provided, however, that except in the case of
adjustment made pursuant or paragraph (g) of Article 6 hereof, the Board of
Directors may not without further approval of the stockholders, (i) increase the
maximum number of Common Shares for which Options may be granted under the Plan
or which may be purchased by an individual Optionee, (ii) decrease the minimum
option price provided in the Plan, or (iii) change the class of persons eligible
to receive Options.
(b) Notwithstanding the foregoing provisions of this Article 11, except as
may otherwise be provided herein, no person may be divested of the ownership of
Common Shares previously issued, sold or transferred under the Plan.
12. Other Conditions: If at any time counsel to the Company
shall be of the opinion that any sale or delivery of Common Shares pursuant to
an Option granted under the Plan is or may in the circumstances be unlawful
under the statutes, rules or regulations of any applicable jurisdiction, the
Company shall have no obligation to make such sale or delivery, and the Company
shall not be required to make any application or to effect or to maintain any
qualification or registration under the Securities Act of 1933 or otherwise with
respect to Common Shares or Options under the Plan, and the right to exercise
any such Option may be suspended until, in the opinion of said counsel, such
sale or delivery shall be lawful.
Upon termination of any period of suspension under this
Article 12, any Option affected by such suspension which shall not then have
expired or terminated shall be reinstated as to all Common Shares available upon
exercise of the Option before such suspension and as to Common Shares which
would otherwise have become available for purchase during he period of such
suspension, but no suspension shall extend any Option Period.
At the time of any grant or exercise of any Option, the
Company may, if it shall deem it necessary or desirable for any reason connected
with any law or regulation of any governmental authority relative to the
regulation of securities, condition the grant and/or exercise of such Option
upon the Optionee making certain representations to the Company and the
satisfaction of the Company with the correctness of such representations.
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13. Approval; Effective Date: The Plan shall become effective
upon the approval by the stockholders of the Company at the Annual Meeting of
Stockholders to be held February 20, 1998 or at any adjournment thereof.
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EXHIBIT B
NEW YORK BUSINESS CORPORATION LAW
Section 623. Procedure to enforce shareholder's right to receive payment for
shares
(a) A shareholder intending to enforce his rights under a section of
this chapter to receive payment for his shares if the proposed corporate action
referred to therein is taken shall file with the corporation, before the meeting
of shareholders at which the action is submitted to a vote, or at such meeting
but before the vote, written objection to the action. The objection shall
include a notice of his election to dissent, his name and residence address, the
number and classes of shares as to which he dissents and a demand for payment of
the fair value of his shares if the action is taken. Such objection is not
required from any shareholder to whom the corporation did not give notice of
such meeting in accordance with this chapter or where the proposed action is
authorized by written consent of shareholders without a meeting.
(b) Within ten days after the shareholders' authorization date, which
term as used in this section means the date on which the shareholders' vote
authorizing such action was taken, or the date on which such consent without a
meeting was obtained from the requisite shareholders, the corporation shall give
written notice of such authorization or consent by registered mail to each
shareholder who filed written objection or from whom written objection was not
required, excepting any shareholder who voted for or consented in writing to the
proposed action and who thereby is deemed to have elected not to enforce his
right to receive payment for his shares.
(c) Within twenty days after the giving of notice to him, any
shareholder from whom written objection was not required and who elects to
dissent shall file with the corporation a written notice of such election,
stating his name and residence address, the number and classes of shares as to
which he dissents and a demand for payment of the fair value of his shares. Any
shareholder who elects to dissent from a merger under section 905 (Merger of
subsidiary corporation) or paragraph (c) of section 907 (Merger or consolidation
of domestic and foreign corporations) or from a share exchange under paragraph
(g) of section 913 (Share exchanges) shall file a written notice of such
election to dissent within twenty days after the giving to him of a copy of the
plan of merger or exchange or an outline of the material features thereof under
section 905 or 913.
(d) A shareholder may not dissent as to less than all of the shares, as
to which he has a right to dissent, held by him of record, that he owns
beneficially. A nominee or fiduciary may not dissent on behalf of any beneficial
owner as to less than all of the shares of such owner, as to which such nominee
or fiduciary has a right to dissent, held of record by such nominee or
fiduciary.
(e) Upon consummation of the corporate action, the shareholder shall
cease to have any of the rights of a shareholder except the right to be paid the
fair value of his
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shares and any other rights under this section. A notice of election may be
withdrawn by the shareholder at any time prior to his acceptance in writing of
an offer made by the corporation, as provided in paragraph (g), but in no case
later than sixty days from the date of consummation of the corporate action
except that if the corporation fails to make a timely offer, as provided in
paragraph (g), the time for withdrawing a notice of election shall be extended
until sixty days from the date an offer is made. Upon expiration of such time,
withdrawal of a notice of election shall require the written consent of the
corporation. In order to be effective, withdrawal of a notice of election must
be accompanied by the return to the corporation of any advance payment made to
the shareholder as provided in paragraph (g). If a notice of election is
withdrawn, or the corporate action is rescinded, or a court shall determine that
the shareholder is not entitled to receive payment for his shares, or the
shareholder shall otherwise lose his dissenter's rights, he shall not have the
right to receive payment for his shares and he shall be reinstated to all his
rights as a shareholder as of the consummation of the corporate action,
including any intervening preemptive rights and the right to payment of any
intervening dividend or other distribution or, if any such rights have expired
or any such dividend or distribution other than in cash has been completed, in
lieu thereof, at the election of the corporation, the fair value thereof in cash
as determined by the board as of the time of such expiration or completion, but
without prejudice otherwise to any corporate proceedings that may have been
taken in the interim.
(f) At the time of filing the notice of election to dissent or within
one month thereafter the shareholder of shares represented by certificates shall
submit the certificates representing his shares to the corporation, or to its
transfer agent, which shall forthwith note conspicuously thereon that a notice
of election has been filed and shall return the certificates to the shareholder
or other person who submitted them on his behalf. Any shareholder of shares
represented by certificates who fails to submit his certificates for such
notation as herein specified shall, at the option of the corporation exercised
by written notice to him within forty-five days from the date of filing of such
notice of election to dissent, lose his dissenter's rights unless a court, for
good cause shown, shall otherwise direct. Upon transfer of a certificate bearing
such notation, each new certificate issued therefor shall bear a similar
notation together with the name of the original dissenting holder of the shares
and a transferee shall acquire no rights in the corporation except those which
the original dissenting shareholder had at the time of transfer.
(g) Within fifteen days after the expiration of the period within which
shareholders may file their notices of election to dissent, or within fifteen
days after the proposed corporate action is consummated, whichever is later (but
in no case later than ninety days from the shareholders' authorization date),
the corporation or, in the case of a merger or consolidation, the surviving or
new corporation, shall make a written offer by registered mail to each
shareholder who has filed such notice of election to pay for his shares at a
specified price which the corporation considers to be their fair value. Such
offer shall be accompanied by a statement setting forth the aggregate number of
shares with respect to which notices of election to dissent have been received
and the aggregate number of holders of such shares. If the corporate action has
been consummated, such offer shall
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also be accompanied by (1) advance payment to each such shareholder who has
submitted the certificates representing his shares to the corporation, as
provided in paragraph (f), of an amount equal to eighty percent of the amount of
such offer, or (2) as to each shareholder who has not yet submitted his
certificates a statement that advance payment to him of an amount equal to
eighty percent of the amount of such offer will be made by the corporation
promptly upon submission of his certificates. If the corporate action has not
been consummated at the time of the making of the offer, such advance payment or
statement as to advance payment shall be sent to each shareholder entitled
thereto forthwith upon consummation of the corporate action. Every advance
payment or statement as to advance payment shall include advice to the
shareholder to the effect that acceptance of such payment does not constitute a
waiver of any dissenters' rights. If the corporate action has not been
consummated upon the expiration of the ninety day period after the shareholders'
authorization date, the offer may be conditioned upon the consummation of such
action. Such offer shall be made at the same price per share to all dissenting
shareholders of the same class, or if divided into series, of the same series
and shall be accompanied by a balance sheet of the corporation whose shares the
dissenting shareholder holds as of the latest available date, which shall not be
earlier than twelve months before the making of such offer, and a profit and
loss statement or statements for not less than a twelve month period ended on
the date of such balance sheet or, if the corporation was not in existence
throughout such twelve month period, for the portion thereof during which it was
in existence. Notwithstanding the foregoing, the corporation shall not be
required to furnish a balance sheet or profit and loss statement or statements
to any shareholder to whom such balance sheet or profit and loss statement or
statements were previously furnished, nor if in connection with obtaining the
shareholders' authorization for or consent to the proposed corporate action the
shareholders were furnished with a proxy or information statement, which
included financial statements, pursuant to Regulation 14A or Regulation 14C of
the United States Securities and Exchange Commission. If within thirty days
after the making of such offer, the corporation making the offer and any
shareholder agree upon the price to be paid for his shares, payment therefor
shall be made within sixty days after the making of such offer or the
consummation of the proposed corporate action, whichever is later, upon the
surrender of the certificates for any such shares represented by certificates.
(h) The following procedure shall apply if the corporation fails to
make such offer within such period of fifteen days, or if it makes the offer and
any dissenting shareholder or shareholders fail to agree with it within the
period of thirty days thereafter upon the price to be paid for their shares:
(1) The corporation shall, within twenty days after the expiration of
whichever is applicable of the two periods last mentioned, institute a special
proceeding in the supreme court in the judicial district in which the office of
the corporation is located to determine the rights of dissenting shareholders
and to fix the fair value of their shares. If, in the case of merger or
consolidation, the surviving or new corporation is a foreign corporation without
an office in this state, such proceeding shall be brought in the country where
the office of the domestic corporation, whose shares are to be valued, was
located.
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(2) If the corporation fails to institute such proceeding within such
period of twenty days, any dissenting shareholder may institute such proceeding
for the same purpose not later than thirty days after the expiration of such
twenty day period. If such proceeding is not instituted within such thirty day
period, all dissenter's rights shall be lost unless the supreme court, for good
cause shown, shall otherwise direct.
(3) All dissenting shareholders, excepting those who, as provided in
paragraph (g), have agreed with the corporation upon the price to be paid for
their shares, shall be made parties to such proceeding, which shall have the
effect of an action quasi in rem against their shares. The corporation shall
serve a copy of the petition in such proceeding upon each dissenting shareholder
who is a resident of this state in the manner provided by law for the service of
a summons, and upon each nonresident dissenting shareholder either by registered
mail and publication, or in such other manner as is permitted by law. The
jurisdiction of the court shall be plenary and exclusive.
(4) The court shall determine whether each dissenting shareholder, as
to whom the corporation requests the court to make such determination, is
entitled to receive payment for his shares. If the corporation does not request
any such determination or if the court finds that any dissenting shareholder is
so entitled, it shall proceed to fix the value of the shares, which, for the
purposes of this section, shall be the fair value as of the close of business on
the day prior to the shareholders' authorization date. In fixing the fair value
of the shares, the court shall consider the nature of the transaction giving
rise to the shareholder's right to receive payment for shares and its effects on
the corporation and its shareholders, the concepts and methods then customary in
the relevant securities and financial markets for determining fair value of
shares of a corporation engaging in a similar transaction under comparable
circumstances and all other relevant factors. The court shall determine the fair
value of the shares without a jury and without referral to an appraiser or
referee. Upon application by the corporation or by any shareholder who is a
party to the proceeding, the court may, in its discretion, permit pretrial
disclosure, including, but not limited to, disclosure of any expert's reports
relating to the fair value of the shares whether or not intended for use at the
trial in the proceeding and notwithstanding subdivision (d) of section 3101 of
the civil practice law and rules.
(5) The final order in the proceeding shall be entered against the
corporation in favor of each dissenting shareholder who is a party to the
proceeding and is entitled thereto for the value of his shares so determined.
(6) The final order shall include an allowance for interest at such
rate as the court finds to be equitable, from the date the corporate action was
consummated to the date of payment. In determining the rate of interest, the
court shall consider all relevant factors, including the rate of interest which
the corporation would have had to pay to borrow money during the pendency of the
proceeding. If the court finds that the refusal of any shareholder to accept the
corporate offer of payment for his shares was arbitrary, vexatious or otherwise
not in good faith, no interest shall be allowed to him.
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(7) Each party to such proceeding shall bear its own costs and
expenses, including the fees and expenses of its counsel and of any experts
employed by it. Notwithstanding the foregoing, the court may, in its discretion,
apportion and assess all or any part of the costs, expenses and fees incurred by
the corporation against any or all of the dissenting shareholders who are
parties to the proceeding, including any who have withdrawn their notices of
election as provided in paragraph (e), if the court finds that their refusal to
accept the corporate offer was arbitrary, vexatious or otherwise not in good
faith. The court may, in its discretion, apportion and assess all or any part of
the costs, expenses and fees incurred by any or all of the dissenting
shareholders who are parties to the proceeding of the dissenting shareholders
who are parties to the proceeding against the corporation if the court finds any
of the following: (A) that the fair value of the shares as determined materially
exceeds the amount which the corporation offer to pay; (B) that no offer or
required advance payment was made by the corporation; (C) that the corporation
failed to institute the special proceeding within the period specified therefor;
or (D) that the action of the corporation in complying with its obligations as
provided in this section was arbitrary, vexatious or otherwise not in good
faith. In making any determination as provided in clause (A), the court may
consider the dollar amount or the percentage, or both, by which the fair value
of the shares as determined exceeds the corporate offer.
(8) Within sixty days after final determination of the proceeding, the
corporation shall pay to each dissenting shareholder the amount found to be due
him, upon surrender of the certificates for any such shares represented by
certificates.
(i) Shares acquired by the corporation upon the payment of the agreed
value therefor or of the amount due under the final order, as provided in this
section, shall become treasury shares or be cancelled as provided in section 515
(Reacquired shares), except that, in the case of a merger or consolidation, they
may be held and disposed of as the plan of merger or consolidation may otherwise
provide.
(j) No payment shall be made to a dissenting shareholder under this
section at a time when the corporation is insolvent or when such payment would
make it insolvent.
In such event, the dissenting shareholder shall, at this option:
(1) Withdraw his notice of election, which shall in such event be
deemed withdrawn with the written consent of the corporation; or
(2) Retain his status as a claimant against the corporation and, if it
is liquidated, be subordinated to the rights of creditors of the corporation,
but have rights superior to the non-dissenting shareholders, and if it is not
liquidated, retain his right to be paid for his shares, which right the
corporation shall be obliged to satisfy when the restrictions of this paragraph
do not apply.
(3) The dissenting shareholder shall exercise such option under
subparagraph (1) or (2) by written notice filed with the corporation within
thirty days after the corporation has given him written notice that payment for
his shares cannot be made
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because of the restrictions of this paragraph. If the dissenting shareholder
fails to exercise such option as provided, the corporation shall exercise the
option by written notice given to him within twenty days after the expiration of
such period of thirty days.
(k) The enforcement by a shareholder of his right to receive payment
for his shares in the manner provided herein shall exclude the enforcement by
such shareholder of any other right to which he might otherwise be entitled by
virtue of share ownership, except as provided in paragraph (e), and except that
this section shall not exclude the right of such shareholder to bring or
maintain an appropriate action to obtain relief on the ground that such
corporation action will be or is unlawful or fraudulent as to him.
(l) Except as otherwise expressly provided in this section, any notice
to be given by a corporation to a shareholder under this section shall be given
in the manner provided in section 605 (Notice of meetings of shareholders).
(m) This section shall not apply to foreign corporations except as
provided in subparagraph (3)(2) of section 907 (Merger or consolidation of
domestic and foreign corporations).
Section 910. Right of shareholder to receive payment for shares upon merger,
consolidation or sale, lease, exchange or other disposition of assets
(a) A shareholder of a domestic corporation shall, subject to and by
complying with section 623 (Procedure to enforce shareholder's right to receive
payment for shares), have the right to receive payment of the fair value of his
shares and the other rights and benefits provided by such section, in the
following cases:
(1) Any shareholder entitled to vote who does not assent to the taking
of an action specified in subparagraphs (A) and (B).
(A) Any plan of merger or consolidation to which the corporation is a
party; except that the right to receive payment of the fair value of his shares
shall not be available:
(i) To a shareholder of the surviving corporation in a merger
authorized by section 905 (Merger of subsidiary corporation), or paragraph (c)
of section 907 (Merger or consolidation of domestic and foreign corporations);
and
(ii) To a shareholder of the surviving corporation in a merger
authorized by this article, other than a merger specified in subparagraph (i),
unless such merger effects one or more changes specified in subparagraph (b)(6)
of section 806 (Provisions as to certain proceedings) in the rights of the
shares held by such shareholder.
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(B) Any sale, lease, exchange or other disposition of all or
substantially all of the assets of a corporation which requires shareholder
approval under section 909 (Sale, lease, exchange or other disposition of
assets) other than a transaction wholly for cash where the shareholders'
approval thereof is conditioned upon the dissolution of the corporation and the
distribution of substantially all of its net assets to the shareholders in
accordance with their respective interests within one year after the date of
such transaction.
(2) Any shareholder of the subsidiary corporation in a merger
authorized by section 905 or paragraph (c) of section 907, who files with the
corporation a written notice of election to dissent as provided in paragraph (c)
of section 623.
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